Posted!

Join the Conversation

LME, Goldman sued over aluminum storage

Kelvin Chan, AP
12:24 p.m. MST August 5, 2013

A trader works in the Goldman Sachs booth on the floor of the New York Stock Exchange in March 2012. On Monday, it was announced that the London Metal Exchange and Goldman Sachs are being sued in a U.S. court over alleged anti-competitive and monopolistic behavior in aluminum storage.(Photo: Richard Drew, AP)

Story Highlights

LME and Goldman Sachs are accused of "anti-competitive and monopolistic" practices

The lawsuit was filed by Superior Extrusion Inc., which makes aluminum tubing and beams

The bank pointed out that the overall delivered price of aluminum is down almost 40% since 2006

HONG KONG (AP) — A class-action lawsuit has been filed in the U.S. against the London Metal Exchange (LME) and Goldman Sachs, alleging that their "anti-competitive and monopolistic behavior" in aluminum storage has unfairly influenced the price of the commodity.

A growing number of wholesale buyers of aluminum, which is widely used in manufacturing and high-tech industries, have complained about rising metal prices that they blame on not having timely access to the storage warehouses.

Lead plaintiff Superior Extrusion, a privately held maker of aluminum tubing and beams, filed the suit on Aug. 1, in U.S. District Court for the eastern district of Michigan.

Wall Street banks and some metal exchanges are facing increased scrutiny of their involvement in businesses that store and transport commodities, such as oil and aluminum.

In July, a Senate committee held a hearing into whether banks should be allowed to control power plants, warehouses and oil refineries.

The owner of the LME, Hong Kong Exchanges and Clearing, said in a statement Sunday that it will fight the lawsuit, which it believes is without merit.

In the past few days, Goldman announced it is taking measures to make more aluminum immediately available to customers at its metal storage business, Metro International Trade Services, which operates under LME regulations.

The bank pointed out in making its announcement that "the overall delivered price of aluminum is down nearly 40% since its 2006 peak levels."

Hong Kong Exchanges Ltd., which operates the Hong Kong stock exchange, in 2012 bought the LME, which approves and licenses a network of more than 700 metal storage facilities in 40 locations across the U.S., Europe and Asia.

JPMorgan Chase said a few days ago that the possibility of new regulations was a factor behind its decision to consider selling some of its physical commodities business, which includes metals and energy. It has agreed to pay $410 million to settle accusations by U.S. regulators that it manipulated electricity prices.